Italy revises 'Google tax' to exclude goods purchased online

ROME (Reuters) - Italian lawmakers have revised proposed legislation that would raise revenue from online companies including Google and Amazon, but its passage is still uncertain as the leader of the main ruling party said it should be scrapped.

Prime Minister Enrico Letta's government last month proposed the law, dubbed the "Google tax", that would oblige companies that advertise and sell online in Italy to do so only through agencies with a tax presence in the country.

The lower house budget committee late on Tuesday, however, excluded goods bought online from the legislation - also known as the "Web tax" - making the law applicable to advertising only. The measure would become law with the passage of the 2014 budget, due by the end of the year.

The measure was scaled back after Matteo Renzi, the new leader of the Democratic Party (PD), which is the largest in the ruling coalition, said on Tuesday that it should be scrapped.

It would not tax the multinationals directly, but require them to use Italian companies to sell their advertisements rather than doing so through third parties based in low-tax countries such as Luxembourg, Ireland or outside the European Union.

"Web freedom does not mean the freedom not to pay taxes," said lawmaker Francesco Boccia, president of the lower house budget committee, who is considered close to Prime Minister Letta and has pushed hard for the measure.

Since both Boccia and Letta are members of the Democratic Party, which Renzi leads after a landslide victory in a primary vote earlier this month, it still is not clear where exactly the PD stands on the issue.

While opponents of the measure say it would probably violate EU rules, proponents have said it will raise at least 1 billion euros ($1.37 billion) a year for a country that is struggling to lower its debt, the second-highest in the EU after Greece.

The Senate is expected to cast the final vote on the 2014 budget before Christmas. The lower house is expected to vote by the end of the week on whether to include the "Google tax" in the budget.